Dynamic relationship between precious metals and Central European stock markets

• Authors: Siemaszkiewicz Karolina

Title variants

PL

Dynamiczna relacja między metalami szlachetnymi i rynkami giełdowymi krajów Europy Środkowej

• Languages of publication: EN

Abstracts

EN

High volatility and the contagion effect have led investors to consider alternative instruments as a part of their portfolios to be able to diversify away from the increasing risk in the stock markets. As alternative instruments, one can consider investing in such metals as gold, silver, copper, and platinum. This paper investigates the dynamic relationship between gold, silver, platinum, copper, and the Central European stock markets. The aim of this article is to identify if those metals can be considered as safe haven instruments for investors from the Czech Republic, Hungary, Poland, and Slovakia. The considered period is from 01.01.2007 to 30.06.2020. The calculations of DCC-GARCH model parameters were made by using the professional program OxMetrics by J.A. Doornik. There were 22 metal/metal or metal/index DCC-GARCH realization carried out. Significant differences exist in the correlation structure for two groups of metals. Gold and silver can be considered as an investment asset. Platinum and copper are mainly industrial metals. From this research, one can define silver as a safe haven instrument. During the financial crises, one can also observe the negative values of correlations between gold and indices, which means that gold served as a safe haven.

PL

Występująca wysoka zmienność rynków finansowych doprowadziła inwestorów do rozważenia inwestycji alternatywnych jako części swoich portfeli, tak aby zdywersyfikować rosnące ryzyko rynków giełdowych. Jako instrument alternatywny możemy traktować inwestycje w takie metale, jak złoto, srebro, miedź oraz platyna. W artykule przeanalizowano dynamiczną relację między złotem, srebrem, platyną, miedzią oraz rynkami giełdowymi krajów Europy Środkowej. Głównym celem autora jest odpowiedź na pytanie, czy wymienione metale mogą być rozważane jako instrument „bezpiecznej przystani” dla inwestorów z Czech, Węgier, Polski i Słowacji. Pod uwagę brano okres od 01.01.2007 do 30.06.2020 r. Z opracowania wynika, że możemy rozważać srebro jako instrument typu „bezpieczna przystań”. Ponadto podczas kryzysu finansowego zaobserwowano negatywną wartość korelacji między złotem a indeksami giełdowymi, co oznacza, że we wspomnianym czasie złoto mogło być postrzegane jako instrument „bezpiecznej przystani”.

Keywords

EN

alternative investments; precious metals; DCC-GARCH model; dynamic correlation

PL

inwestycje alternatywne; metale szlachetne; model DCC-GARCH; dynamiczne korelacje

• Publisher: Wydawnictwo Uniwersytetu Ekonomicznego we Wrocławiu
• Journal: Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu
• Year: 2020
• Issue: vol. 64, nr 12
• Pages: 101-112

Contributors

author

Siemaszkiewicz Karolina

• Poznań University of Economics and Business

References

• Alonso, E., Field, F. R., & Kirchain, R. E. (2012). Platinum availability for future automotive. Technologies. Environmental Science Technology, 46 (23), 12986-12993. doi:10. 1021/es301110e
• Baur, D. G., & Lucey, B. M. (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. Financial Review, 45, 217-229.
• Baur, D. G., & McDermott, T. K. (2010). Is gold a safe haven? International evidence. Journal of Banking & Finance, 34, 1886-1898.
• Bayoumi, T., Fazio, G., Kumar, M., & MacDonald, R. (2007). Fatal attraction: Using distance to measure contagion in goods times as well as bad. Review of Financial Economics, 16, 259-273.
• Capies, F., Mills, T. C., & Wood, G. (2005). Gold as a hedge against the dollar. Journal of International Financial Markets, Institutions and Money, 15, 343-352.
• Chkili, W. (2016). Dynamic correlations and hedging effectiveness between gold and stock markets: Evidence for BRICS countries. Research in International Business and Finance, 38, 22-34. doi:10.1016/j.ribaf.2016.03.005
• Ciner, C. (2011). Commodity prices and inflation: Testing in the frequency domain. Research in International Business and Finance, 25, 229-237.
• Climent, F., & Meneu, V. (2003). Has the 1997 Asian crisis increased information flows between international markets? International Review of Economics & Finance, 12, 111-143.
• Creti, A., Joëts, M., & Mignon, V. (2013). On the links between stock and commodity markets’ volatility. Energy Economics, 37, 16-28.
• Diamandis, P. F. (2009). International stock market linkages: Evidence from Latin America. Global Finance Journal, 20, 13-30.
• Emsley, J. (2003). Nature's building blocks: An A–Z guide to the elements. Oxford University Press.
• Engle, R. F. (2002). Dynamic conditional correlation: A simple class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business & Economic Statistics, 20, 339-350.
• Gilmore, C. G., Lucey, B. M., & McManus, G. M. (2008). The dynamics of central European equity market co-movements. Quarterly Review of Economics and Finance, 48, 605-622.
• Gurgun, G., & Unalmis, I. (2014). Is gold a safe haven against equity market investment in emerging and developing countries? Finance Research Letters, 11, 341-348.
• Hammoudeh, S., & Yuan, Y. (2008). Metal volatility in the presence of oil and interest rate shocks. Energy Economics, 30(2), 606-620. doi:10.1016/j.eneco.2007.09.004
• Hammoudeh, S. M., Yuan, Y., McAleer, M., & Thompson, M. A. (2010). Precious metals-exchange rate volatility transmissions and hedging strategies. International Review of Economics & Finance, 19(4), 633-647. doi:10.1016/j.iref.2010.02.003
• Hood, M., & Malik, F. (2013). Is gold the best hedge and a safe haven under changing stock market volatility? Review of Financial Economics, 22, 47-52.
• Joy, M. (2011). Gold and the US dollar: Hedge or haven. Finance Research Letters, 8, 120-131.
• Klein, T. (2017). Dynamic correlation of precious metals and flight-to-quality in developed markets. Finance Research Letters, 23, 283-290.
• Markwat, T., Kole, E., & van Dijk, D. (2009). Contagion as a domino effect in global stock markets. Journal of Banking & Finance, 33(11), 1996-2012.
• Mensi, W., Hammoudeh, S., & Kang, S. H. (2017). Dynamic linkages between developed and BRICS stock markets: Portfolio risk analysis. Finance Research Letters, 21, 26-33. doi:10.1016/j.frl.2016.11.016
• Miyazaki, T., Toyoshima, Y., & Hamori, S. (2012). Exploring the dynamic interdependence between gold and other financial markets. Economics Bulletin, AccessEcon, 32, 37-50.
• Roberdo, J. C. (2013). Is gold a safe haven or hedge for the US dollar? Implications for risk management. Journal of Banking & Finance, 37, 2665-2678.
• Sensoy, A. (2013). Dynamic relationship between precious metals. Resources Policy, 38(4), 504-511. doi:10.1016/j.resourpol.2013.08.004
• Syllignakis, M. N., & Kouretas, G. P. (2011). Dynamic correlation analysis of financial contagion: Evidence from the Central and Eastern European markets. International Review of Economics & Finance, 20, 717-732.